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Q31. After being terminated due to downsizing, an internal auditor finds a different job with an organization in the same industry. Which of the following actions would violate the IIA Code of Ethics?
A. To determine audit priorities in the new job,the auditor uses the audit risk approach that the auditor's previous employer used,without receiving permission to do so.
B. At the new organization,the auditor is asked to develop forms to implement probability- proportional-to-size sampling. Although unsure of how to perform this type of sampling,the auditor proceeds without asking for assistance.
C. In preparing for an audit at the previous organization,the auditor had conducted a great deal of research on the Internet at home to identify best practices for the management of a treasury function. The auditor has retained much of the research and uses it to conduct an audit of the new employer's treasury function.
D. In the first week at the new organization,the auditor discovers a high fraud risk surrounding the organization's database and suggests that the information technology department implement a new password system to prevent fraudulent actions before they occur.
Answer: B
Q32. A company has entered into a $20, 000, 000 fixed-price contract with a general contractor for the construction of a new retail outlet. For this contract, which of the following would represent the greatest risk?
A. Excessive labor charged to the project.
B. Poor physical protection of materials and equipment.
C. Failure to complete the project within budget.
D. Substitution of inferior materials.
Answer: D
Q33. What role, if any, should the internal audit activity have in the process of following up on observations and recommendations made by the external auditors?
A. The internal audit activity should have no role in this process in order to ensure independence.
B. The internal audit activity should become involved only if the chief audit executive has sufficient evidence that the follow-up is not occurring.
C. The internal audit activity should review the adequacy and effectiveness of management's follow-up actions.
D. The internal audit activity should become involved only if specifically requested by management or the board of directors.
Answer: C
Q34. An internal audit charter should do which of the following?
A. Outline the schedule of future audits.
B. Define the scope of internal audit activities.
C. Establish the size of the internal audit activity.
D. Communicate the internal audit activity's goals.
Answer: B
Q35. What is the primary purpose of a risk management program?
A. Reduce risk to a tolerable level.
B. Reduce all risks regardless of costs.
C. Transfer all risks to external third parties.
D. Identify every significant risk to avoid it.
Answer: A
Q36. An organization that outsources much of its internal audit work to an external service provider is planning for an external quality assessment. Which of the following options would accomplish this task and be in conformance with the Standards?
A. Engaging an external industry associate that performed a similar review for a supplier of the
organization.
B. Selecting a team from an independent entity that previously employed the chief audit executive of the organization.
C. Using a team under the direction of the organization's chief audit executive,and obtaining
validation from a former manager of the internal audit activity.
D. Using the same external service provider because of its competency and experience with the organization.
Answer: A
Q37. Noncompliance with which of the following would cause a control deficiency related to privacy protection practices?
I. An organization's internal privacy policies.
II. Financial accounting standards.
III. Privacy laws and regulations.
IV.
The Standards.
A.
I and IIIonly
B.
II and IVonly
C.
II,III,and IVonly
D.
I,II,III,and IV.
Answer: A
Q38. A candidate has applied for an entry level internal audit position. The candidate holds a CISA (Certified Information Systems Auditor) designation, and has six months of audit experience, but limited knowledge of accounting principles and techniques. According to the IIA guidance, which of the following is the most relevant reason for the chief audit executive to consider this candidate?
A. Other internal auditors possess sufficient knowledge of accounting principles and techniques.
B. The candidate's information systems knowledge and real-world experience in internal auditing.
C. Accounting skills can be learned over time with appropriate training.
D. An entry level position does not require expertise in any particular area.
Answer: B
Q39. The chief audit executive should periodically report the internal audit activity's purpose, authority, responsibility, and performance, as well as significant risk exposures and control issues, to which of the following?
I. Board of directors.
II. Senior management.
III. Shareholders.
IV.
External auditors.
A.
IIonly
B.
I and IIonly
C.
I,II,and IIIonly
D.
I,III,and IVonly
Answer: B
Q40. Which of the following statements best describes the competency requirement for an auditor regarding fraud risks encountered in an engagement execution?
A. The auditor should be able to have comparable competencies of a person whose primary responsibility is detecting and investigating fraud.
B. The auditor must have sufficient knowledge to evaluate the risk of fraud and the manner in which it is managed by the organization.
C. The auditor is not expected to have any competency requirement regarding fraud since the role of investigating and detecting fraud belongs to other functions in the organization.
D. The auditor must be able to have an appreciation of the fundamentals of fraud detection and investigation techniques.
Answer: B
243. An external quality assurance review which was authorized by the chief audit executive (CAE) indicated significant findings from the Standards. To whom should the final results of the quality assurance review be reported?
A. Confidentially to the CAEonly
B. The CAE with copies to the board and senior management.
C. To the board with copies to the external auditor or regulatory oversight body.
D. To the senior management with a copy to the board.
Answer: B
Q41. Which of the following is an example of a preventive control activity for risk related to pollution caused by waste disposal?
A. Offering an education program delivered by environmental experts.
B. Maintaining strict security around environmental department files.
C. Seeking legal consultation from a firm with experience in environmental law.
D. Taking periodic samples of the area at risk and logging the results.
Answer: A
Q42. Internal auditors who are concerned with potential risks due to the mishandling of records or transactions should take into consideration:
A. The type and nature of the activities to be examined.
B. Whether employees in key positions of trust are bonded.
C. The history of losses suffered by the company.
D. The results of prior risk assessments.
Answer: A
Q43. Which of the following is a limitation of using observation as a manual audit procedure?
A. Observation provides information at a certain time and makes it difficult to draw representative conclusions.
B. Observation is not as persuasive as inquiry due to a lack of direct evidence.
C. Observation is performed specifically to test the validity of documented or recorded information.
D. Observation may cause individuals to behave less critically or carefully if they are aware that other forms of manual audit procedures have already taken place.
Answer: A
335. Which of the following should be the first step that an internal auditor takes to establish data integrity when building an audit working copy of a large database?
A. Search for anomalies in the extracted information.
B. Verify that all required data was downloaded.
C. Review the data for statistical patterns.
D. Ensure that the data is efficiently organized within the database.
Answer: B
Q44. The chief audit executive (CAE) has been asked to manage the regulatory compliance function for the organization's retail store operations. Store operations are included in the annual audit plan.
Which of the following strategies best fulfills the requirements of the Standards regarding these audits?
A. The scope of store operations audits should exclude compliance.
B. Store operations audits can be fully executed with appropriate disclosure to the board.
C. Store operations audits should be performed by an external service provider.
D. A store operations compliance audit should be performed by a staff internal auditor under the direction of the CAE.
Answer: C
Q45. Which of the following control methods is effective in reducing the risk of purchasing-scheme fraud?
1.
Periodically reviewing the vendor list for unusual vendors and addresses.
2.
Segregating duties for amount purchasing, receiving, shipping, and accounting.
3.
Validating sequential integrity of purchase orders.
4.
Verifying the validity of invoices with post office box addresses.
A. 1 and 2 only
B. 3 and 4 only
C. 1,2,and 4 only
D. 1,2,3,and 4
Answer: B